Ulta Bets on Store Remodels and Loyalty Efforts to Sustain Growth
Supply chain and inflation issues aside, Ulta Beauty has made progress in its efforts to launch more stores, remodel existing footprints, and build a strong following by focusing on loyalty initiatives. In the company’s latest earnings call, Ulta’s CEO Dave Kimbell said the company has achieved a record loyalty membership and is launching a new store layout that will transform the customer experience.
COVID recovery is underway, he said in a call with investors — store traffic trends accelerated this past quarter, exceeding pre-pandemic levels for the first time. The payoff comes in strong sales growth from stores and in e-commerce, which the company continues to reinforce. During the quarter, BOPIS increased 18% to 23% of e-commerce sales, compared to 20% last year.
Digital or In-Person the Standout?
Ulta has provided consumers with digital tools to assist them in their online shopping journey. Among them are Glam Lab, Skin Advisor, and the company’s hairstyle tool. Additionally, consumers can use a fragrance finder to explore products by brand or ingredient — a tool that just launched in time for the holiday season.
“Stores are a critical part of our ecosystem,” said Kimbell. “And while most Ulta Beauty's transactions occur in stores, we know the guest journey often begins online.”
Much of the company focus is in its in-store experiences. During the quarter, the brand’s new store layout made its debut, showcasing improved navigation, enhanced services, and increased opportunities for product discovery. Additionally, there will be more branding opportunities for product partners, supporting in-store events, and a relocated checkout closer to the salon.
“The most noticeable changes include the repositioning of skincare, an important growth category to the front of the store,” said Kimbell.
At this time, the company has no plans to retrofit existing stores with these changes.
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While disruptions in the supply chain have slowed progress, prompting some planned store openings to push into 2023 and 2014, the company has already opened 18 new stores this past quarter, relocated one store, and remodeled eight stores.
Ulta’s chief financial officer Scott Settersten said the company plans to open approximately 47 new stores for the year and remodel or relocate 33 stores — with 100 stores opening over the next two years.
“Like many other major retailers, we are seeing project delays resulting from external real estate and construction issues, as well as supply chain disruption for key equipment,” said Settersten. “The timing of opening between fiscal 2023 and 2024 may shift as we navigate these external challenges.”
Doubling Down on Loyalty
As part of this initiative to improve the customer experience, the brand has focused on loyalty membership to strengthen existing relationships. This quarter, Ulta achieved record loyalty membership at 39 million members — 9% higher than Q3 2021 — and the growth continues across all income demographics.
Settersten reports that member spend has increased both in frequency and higher average tickets.
“Our loyalty program is a strategic asset and an important driver of our long-term growth,” said Settersten. “We prioritize member engagement, loyalty, and retention across every Ulta Beauty touch point.”
[Read more: Ulta Beauty Sees Loyalty Member Numbers Return in Droves]
The key word is nurturing — something the brand accomplishes through its Member Love events and life cycle marketing strategies. Ulta is also leveraging CRM tools to elevate personalization and re-engage members in more targeted ways.
“And, of course, conversion of new members also contributes to overall member growth, and we continue to acquire new members in our stores, digital platforms, and through our partnership with Target,” added Settersten.
The company is seeing members “bounce back” to Ulta after becoming active members while at the Ulta Beauty at Target shop.
